Texas Commercial PACE Program: Protecting Borrowers and Creating Economic Benefits

January 11, 2017

Today The Wall Street Journal published a front page article about the California residential PACE program highlighting problems relating to consumer protection and other issues. Fortunately, none of these problems or issues are relevant to, or cause for concern under, the Texas PACE program for the reasons listed below:

  • The purpose of the Texas PACE statute is to enable energy-efficiency financing for commercial and industrial properties.

  • Residential PACE loans are not permitted in Texas.

    • The Texas PACE statute does not authorize single-family residential PACE loans.

    • PACE financing for residential property is available only to borrowers who are in the business of operating multi-family properties containing 5 or more units.

  • The Texas PACE statute includes multiple layers of protection for commercial property owners and lenders, including:

    • Commercial property with a mortgage is not eligible for a PACE loan without the written consent of the mortgage holder. This approach protects preexisting lien rights of the mortgage holder.

    • Prior to closing a PACE loan, an independent professional engineer must confirm that projected savings are consistent with applicable technical standards.

    • Upon completion of the project, an independent professional engineer must confirm that the equipment was properly installed and is operating as intended.

    • The term of the commercial PACE assessment cannot exceed the projected useful life of the improvements.

    • Private, open-market lenders provide all PACE financing in Texas. The Texas PACE program does not utilize government bonds or public funds.

    • All PACE programs established in Texas are administered by the Texas PACE Authority, a non-profit organization whose sole purpose is to operate PACE programs for local jurisdictions. This arrangement is unique to Texas and avoids conflicts that can arise when the PACE administrator is a for-profit organization that receives compensation for both facilitating the program and arranging the loans.

    • Lenders, contractors and other service providers for all PACE projects in Texas are selected independently by the property owners in a free-market, competitive environment not restricted to any particular or favored contractors or lenders.

The Texas commercial PACE program was designed by a group of more than 130 stakeholder-volunteers dedicated to ensuring that the problems and issues highlighted in The Wall Street Journal article will not arise in Texas.

For more information about the Texas PACE program, visit www.KeepingPACEinTexas.org and www.TexasPACEAuthority.org, or contact Charlene Heydinger at charlene.heydinger@KeepPACE.org.

PACE Featured in EDF Blog

Largest Texas City Embraces Private Clean Energy Finance Program in Record Year

By: Charlene Heydinger, Executive Director, Keeping PACE in Texas

htown skyline-720075_640 pixabayAs a bustling metropolis and the biggest city in Texas, Houston has a lot of buildings – and that equals a lot of opportunity to make these facilities more energy- and water-efficient.

Houston grabbed headlines last month when it became the first in Texas to adopt a citywide Property Assessed Clean Energy (PACE) program. PACE will help Houston building owners undertake much-needed water and energy efficiency improvements through private financing – all without having to worry about steep upfront costs. This move means substantial economic development potential, in addition to environmental benefits, for the nation’s fourth largest city.

It’s also a sign this innovative clean energy finance tool is catching fire in Texas: Houston joins Austin’s Travis County, which embraced PACE in March, and a Dallas city ordinance is just on the horizon. Additionally, Cameron and Willacy Counties expect to bring PACE to the Rio Grande Valley in January.

2015 marks a record year for the PACE finance approach across Texas, and interest is growing in several other counties. Even better, all are following the stakeholder-designed PACE in a Box model toolkit – meaning PACE is uniform, user-friendly, and market-based throughout the state.